Successfully Grew Revenues & EBITDA Sequentially & Year Over Year on an Underlying Basis
Sees Continuing Annual Improvements in Free Cash Flow in 2015 & 2016 Relative to Prior Year
Completed Repayment of its $50 Million in Convertible Debentures as Planned
TORONTO, Wednesday, Nov. 11, 2015 – Mood Media Corporation (“Mood Media,” “Mood” or “the Company”) (ISIN: CA61534J1057) (TSX:MM), the world’s largest integrated provider of in-store customer experience solutions, today reported results for the third quarter of 2015 and provided an update on the Company’s progress executing against its strategic and operational plans.
- For the third quarter, Mood achieved revenues of $118.2 million and EBITDA of $25.8 million.
- Q3 EBITDA rose by 5% relative to last quarter, although was down 2% relative to last year. Excluding the impact of foreign exchange, Q3 EBITDA rose by $0.3 million relative to prior year, or 1%. On a year to date basis, EBITDA was $74.4 million, which is $3.6M or 4.9% stronger than the prior year period on an underlying basis.
- Q3 revenues of $118.2 million declined by 4.8% relative to prior year, although on an underlying basis (excluding foreign exchange impact) revenues rose by 1.2% relative to prior year.
- The Company’s 2015/16 global transformation, integration and consolidation initiatives are on track to deliver $7-8 million in annualized savings vs. the original plan of $5 million for Wave 4.
- Local Sales re-build progressed to 131 Account Executives in North America with this initiative achieving gains in Q3 Local new sales and Local Visual new sales.
- Mood’s Premier Team re-contracted 14,162 sites in the quarter, many of which are now recontracting at stable to improving ARPU’s. Additionally, Mood achieved notable key client wins, signing new agreements with several clients that couple Mood bundled Audio, Visual and Mobile solutions as part of integrated services campaigns.
- Mood 2015 EBITDA is now expected to decline slightly relative to prior year as the seasonal lift to equipment and installation revenues that typically occurs in the fourth quarter has not materialized to the normal historic levels. In 2015, foreign exchange impacts and asset sales will reduce reported EBITDA by approximately $3.6 million relative to 2014.
- Mood provides guidance for an improvement in underlying free cash flow generation in 2015 of $10-$15 million relative to 2014 (excluding asset dispositions), but with 2015 free cash flow now to be in the range of low double digit negative for the year. The Company is planning to deliver positive Free Cash Flow in 2016 in each of the first and second halves and will be in the coming weeks both budgeting and managing the business to deliver against that objective.
- Mood recently completed the repayment of principal and interest in the amount of approximately $50 million of 10% convertible unsecured debentures, on time and as planned, in connection with their maturity on October 31, 2015.
“In 2015, Mood has shown positive underlying revenue growth, reversing the negative trend that was evident in the business in 2013 and 2014,” said Steve Richards, President and CEO of Mood Media. “We are achieving positive gains from our integration and efficiency programs with projected savings of more than $7 million from 2015 and 2016 initiatives, and we have stabilized EBITDA performance. Additionally, we have improved upon the cash outflows in the business via these gains, reduced expenditures on onetime matters, and have successfully managed the maturity of the convertible unsecured debentures. Our local sales rebuild initiatives are steadily improving our new sales performance; and our Technomedia and BIS business units are showing the improvements we expected from their financial performance.
“Our third quarter results tracked to our EBITDA expectations, and we have improved revenues and EBITDA relative to prior year on an underlying basis, with year to date EBITDA up 4.9% relative to prior year accounting for foreign exchange and previous asset sales. We have introduced new partner solutions, have grown our local sales force, signed key re-contracts as well as new business wins and continued to grow our Visual solutions. Our fourth quarter 2015 performance to date is not showing the degree of seasonal lift in equipment and installation sales typical in Q4 historically, accordingly we expect Q4 EBITDA will remain stable relative to quarterly performance to date in 2015.
Looking forward, the transformation of Mood will progress on a measured basis. Our focus will be on delivering positive free cash flow in 2016 as we reduce future capital spending on ERP and infrastructure, reduce our level of spending on items including settlements and process re-engineering, leverage the sales gains of 2015 and continue to improve our penetration in Local markets via sales initiatives and partnerships.
“We are pleased with the overall progress Mood has made from an operational and sales performance stand-point. We, expect 2016 will be a year of incremental gains as we further transform Mood as the global leader for client Experience Design solutions,” Richards concluded.
Third Quarter Financial Results
The Company reported Q3 revenues of $118.2 million and EBITDA of $25.8 million. Reported revenues in Q3 declined by $6.0 million relative to the prior year with underlying revenues growing by $1.4 million, or 1% year over year. Mood’s underlying revenue growth was more than offset by $7.4 million of negative impact from foreign exchange translation related to the devaluation of the Euro relative to the U.S. dollar. Mood’s reported rendering of services revenues declined by $5.1 million relative to the prior year with foreign exchange contributing $3.6 million and underlying recurring revenues declining by $1.6 million, or 1.8%. Mood’s reported sale of goods revenues remained relatively stable in Q3 relative to the prior year with underlying revenues rising by $3.1 million, or 8.1%, which was more than offset by a $3.7 million reduction related to foreign exchange. In the third quarter, the average Euro / USD exchange rate used to translate Mood’s Euro results was $1.112 compared with $1.328 in the same period of the prior year. The Company’s total expenses (operating expenses and cost of sales) declined by $5.5 million in Q3 relative to the prior year and rose by $1.7 million on an underlying basis with underlying cost of sales increasing 3.0% year over year, owing to revenue improvements in several business segments, and operating expenses declining by 1.2% on an underlying basis, reflecting continued gains from its integration and synergy activities.
Mood’s EBITDA in Q3 declined by $0.5 million relative to the prior year, with underlying gains of $0.3 million (1.1% year over year) being offset by a $0.8 million impact from the adverse change in foreign exchange rates.